Eversource 2009 Annual Report Download - page 41

33
On January 22, 2010, the DPU approved WMECO's application to issue and sell up to $150 million of senior secured or unsecured
long-term debt, and WMECO continues to assess whether to issue secured or unsecured debt. If WMECO decides to issue first
mortgage bonds, then WMECO will be obligated to secure its $195 million of currently outstanding senior unsecured notes equally and
ratably with such first mortgage bonds.
We had total outstanding long-term and short-term debt of approximately $4.7 billion as of December 31, 2009, compared with
approximately $4.8 billion as of December 31, 2008. The decline reflects a reduction of approximately $520 million in notes payable to
banks, partially offset by approximately $400 million in increases to long-term debt. The decline in total debt was due primarily to
increased cash flows from operations and the sale of approximately 19 million common shares.
We had positive cash flows provided by operating activities in 2009 of $745 million, compared with positive operating cash flows of
$424.1 million in 2008 and negative operating cash flows of $5.7 million in 2007 (all amounts are net of RRB payments, which are
included in financing activities). The improved cash flows in 2009 were due primarily to higher transmission revenues at CL&P after
significant projects were placed in service in late 2008, as well as cost management efforts; a decrease of approximately $225 million
related primarily to amounts spent on CL&P's Federally Mandated Congestion Charge (FMCC) and Generation Service Charge (GSC),
the costs of which are passed on to customers; approximately $100 million less in cash expenditures on fuel, materials and supplies in
2009 due primarily to the lower cost of gas being stored by Yankee Gas for the winter heating season; and the absence in 2009 of the
litigation settlement payment of $49.5 million made in 2008. A cash flow increase due to improved collections of accounts receivable in
2009 was more than offset by increased payments in 2009 from storm costs from December 2008. The increase in operating cash
flows from 2007 to 2008 was due primarily to the absence in 2008 of approximately $400 million in tax payments made in 2007 related
to the 2006 sale of the Company’s former competitive generation business.
We project consolidated cash flows provided by operating activities of approximately $4 billion from 2010 through 2014, net of RRB
payments, ranging from approximately $700 million in 2010 to approximately $1.1 billion in 2014, assuming our capital projects are
completed as expected and we receive fair regulatory treatment on related expenditures. We expect the vast majority of our capital
programs to be funded through cash flows provided by operating activities and new debt issuances and currently anticipate a single NU
common share issuance in the next five years of approximately $300 million, which is expected no earlier than 2012. The projection for
2010 operating cash flows reflects a cash contribution of approximately $45 million, the majority of which will be funded by PSNH, into
the Company’s pension plan in the third quarter of 2010 as described under "Liquidity-Impact of Financial Market Conditions" in this
Management's Discussion and Analysis. This contribution will be the first contribution into the Company’s pension plan in approximately
20 years. In addition, we will potentially contribute approximately $200 million into our pension plan in 2011.
A summary of the current credit ratings and outlooks by Moody's Investors Service (Moody's), Standard & Poor's (S&P) and Fitch
Ratings (Fitch) for senior unsecured debt of NU parent and WMECO and senior secured debt of CL&P and PSNH is as follows:
Moody's S&P Fitch
Current Outlook Current Outlook Current Outlook
NU parent Baa2 Stable BBB- Stable BBB Stable
CL&P A2 Stable BBB+ Stable A- Stable
PSNH A3 Stable BBB+ Stable BBB+ Stable
WMECO Baa2 Stable BBB Stable BBB+ Stable
In August 2009, Moody’s completed an industry-wide review of the number of levels between utility first mortgage bonds and utility
unsecured debt. Moody’s stated that its review of utility credit defaults showed a much higher rate of recovery for first mortgage bonds
than for unsecured debt. The review resulted in one-level upgrades of CL&P and PSNH first mortgage bonds by Moody’s. In the
second half of 2009, subsequent to those upgrades, all three rating agencies reaffirmed all of their existing credit ratings and stable
outlooks on NU parent, CL&P, PSNH and WMECO. On January 22, 2010, Fitch downgraded CL&P’s preferred stock rating from BBB
to BBB- as a result of revised guidelines for rating preferred stock and hybrid securities in general.
If NU parent's senior unsecured debt ratings were to be reduced to below investment grade level by either Moody's or S&P, a number of
Select Energy's supply contracts would require Select Energy to post additional collateral in the form of cash or LOCs. If such an event
had occurred as of December 31, 2009, Select Energy, under its remaining contracts, would have been required to provide additional
cash or LOCs in an aggregate amount of $29.8 million to various unaffiliated counterparties and additional cash or LOCs in the
aggregate amount of $8.6 million to independent system operators. NU parent would have been and remains able to provide that
collateral on behalf of Select Energy.
We paid common dividends of $162.4 million in 2009, compared with $129.1 million in 2008 and $121 million in 2007. The increase
from 2007 to 2009 is the result of a 6.7 percent increase in our common dividend rate that took effect in the third quarter of 2007,
additional 6.3 percent and 11.8 percent increases that took effect in the third quarter of 2008 and first quarter of 2009, respectively, and
a higher number of shares outstanding in the second, third and fourth quarters of 2009. On February 9, 2010, our Board of Trustees
declared a quarterly common dividend of $0.25625 per share, payable on March 31, 2010 to shareholders of record as of March 1,
2010, which represents a 7.9 percent increase from the quarterly 2009 common dividend rate. The new annualized rate of $1.025 per
share represents an increase of $0.075 per share above the previous annualized rate of $0.95 per share.
We target paying out approximately 50 percent of consolidated earnings in the form of common dividends. Our ability to pay common
dividends is subject to approval by our Board of Trustees and our future earnings and cash flow requirements and may be limited by
certain state statutes, the leverage restrictions in our revolving credit agreement and the ability of our subsidiaries to pay common